What happened

Intercept Pharmaceuticals (NASDAQ:ICPT), a biotech focused on liver diseases, fell 21% as of 3:26 p.m. EDT Thursday. The fall is traceable to a safety announcement released by the FDA that warns of an increased risk of "serious liver injury and death" when Intercept's liver disease drug Ocaliva is dosed incorrectly.

So what

The announcement was made in response to 19 patient deaths that have been reported by users of the Ocaliva since the drug was first approved for sale in May 2016. In addition, 11 other cases of serious liver injury have also been reported.

This announcement follows a letter that was sent out by Intercept's Chief Medical Officer last week that urged providers to stick to the drug's approved dosing scheduled.

Given the renewed concerns surrounding Ocaliva -- which is Intercept's only marketed drug -- it is easy to understand why shares are being slammed on Thursday.

A management team around conference table looking worried.

Image source: Getty Images.

Now what

Intercept's management team did its best to calm investor's nerves last week at an important investor conference following the release of their own letter, but Thursday's update certainly raises new concerns about Ocaliva's safety profile. In response, it is possible that providers might be much more tepid with their use of the drug moving forward, which, if true, could put a dent in Intercept's growth trajectory. 

It's a possibility that Thursday's move will prove to be an overreaction, but given the high number of patient deaths and liver injuries, I think the smart play is to watch this story unfold from the safety of the sidelines.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.